Retail Forex trading is no doubt a booming business in Kenya as people search for several investment alternatives. It is currently estimated that the global forex market could be exchanging over $4 trillion dollars every single day and the market is still growing. Kenyans are moving out of the conventional investment options of just buying shares and there is a growing number who have now invested in forex. There is some information that the Kenyan government is planning to start an exchange centre in Nairobi and the question we need to be asking ourselves is what is the future of forex market in Kenya? Are there some good investment opportunities for Kenyans or just but another opportunity that will see thousands of Kenyans lose money?
Let us reflect on what happened when the stock market was ‘opened’ or let us say, people got to know for sure that they can invest in stocks. First there were those who were a little bit skeptical about the whole scenario. This was a time when the president Kibaki government was gaining roots and few people could not trust the government promises. The fears that people had due to the former regime were with them. The IPO for KenGen came and there was a massive 300% over subscription. Those who were lucky to be allocated shares by this time made some good money. Those who never knew what an IPO is got an opportunity not only to trade in the stock market but also to sit and wait for the next IPO. The next major IPO from the most profitable company in east Africa safaricom came. People sold their cows, took bank loans and withdrew their savings in order to get some safaricom shares. They even sold shares they held with other companies, destabilizing the Nairobi stock exchange with the result being that several listed company shares were undervalued and the big players in the market went fishing for them.
The result for many was a pure disaster. Besides paying the bank for the loans they took, they also had to pay interest on the loan, deal with the issue of refund (and before you get the refund, you are still paying interest on your loan), plus the major negative fact that the shares never gave people the returns they were expecting. The other day I watched a heated debate on parliament with members of parliament arguing why there is MTN network in Kenya. I may assume that maybe the problem is not the MTN network in Kenya but what will the future of safaricom shares be when another major competitor penetrates the market ? Brokers who were selling the shares succeeded in giving the true image of safaricom future but I think (this is my opinion), they did not explain the arithmetic part of the shares. The result, people pegged their investment decisions on hopes but not on the reality.
Why am I talking about safaricom shares in an article about forex ? It’s simply because there is a very high likelihood that what happened to the safaricom IPO may repeat itself when the government does move ahead and establish the forex exchange centre here in Kenya. At this time, forex trading will be in the news, journalist will dissect the information and present the great investment stories such as the current forex billionaires who only started with small amounts of money. They will instill nothing but hope and the government will be praised for the job well done. People will be so ‘grateful’ because they will have finally secured an investment opportunity to “solve” their problems.
BUT will this be the situation ? Most people do mass following. They do not take time to study their investment, they follow others. A good number of people will by this time have heard about forex trading but probably doubted but now that the exchange centre is here and having been brought by the government, they will most likely believe, and repeat the same investment mistake; rush into the forex market without clearly understanding the market. I may assume people will take loans, sell their cows and others assets again, pump the money into the forex market but because the forex market happens to be highly volatile, the new beginners will most likely lose everything. The result is that they will go back to the journalist complaining of what is happening, write bad comments about the forex brokers they are using, tell everyone not to invest in forex, ….but the actual problem would be, they never knew what they were doing in the first place. If so many people lose, which is highly likely because I doubt if people will get training on how to trade forex before trading, the government maybe forced to come up with some measures to protect people from losing more money. Basically, you might hear of such regulations as one must be having a certain minimum amount of capital (in millions, which will block out several people and eliminate the use of high leverage) to invest in forex while at the moment you can open a forex account with as little as $25. The brokers operating in country may be required not to offer high leverage (not more than 1:50) like it is the case now in USA.
What is the way forward ? Only those people who adequately train in forex eventually make it. The rest juts lose their money. Kenyans should take the advantages being offered by the forex market but do so in such a manner that our hard earned money is not lost but rather gain more capital which we bring back into the country. There are different places where one can traine and www.kenyaforexanswers.com is a Kenyan site offering you free lessons on forex trading. You need to learn the dynamics of the market before you can benefit from this mega market. Should you wish to get more information on forex or one on one training, you can call me on 0727 29 29 60. My name is Patrick and I am a full time forex trader. I will be glad to help you out and see you succeed.